Investigating the Certain Point of Inflation and Optimal Level of Working Capital Management and its Impact on the Financial Performance of the Companies

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JOKAR HOSSEIN; Daneshi Vahid; Bahar Moghadam Mehdi

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Journal Paper

Paper Information

Journal: Financial Accounting Research Year:2019 | Volume:11 | Issue:3 (41) Page(s): 19-50

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Information Journal Paper

Title

Investigating the Certain Point of Inflation and Optimal Level of Working Capital Management and its Impact on the Financial Performance of the Companies

Author(s)

JOKAR HOSSEIN | Daneshi Vahid | Bahar Moghadam Mehdi | Issue Writer Certificate

Keywords

InflationQ2

Working Capital ManagementQ2

ProfitabilityQ2

Abstract

The purpose of this paper is investigating the certain point of Inflation and optimal level of Working Capital Management and its impact on the financial performance of the companies. Inflation variable is measured using the consumer price index and the measurement of the Working Capital Management is done using the variable of net working capital. Financial performance variable is measured using the variable of return on assets ratio. To achieve this goal the data of 90 companies listed in Tehran Stock Exchange during the financial periods from 2008 to 2017 is used. The results of this study show that there is a non-linear and inverse U-shape relationship between Inflation and financial performance. This means that as the Inflation increases the financial performance of firms will increase, but when Inflation reaches a certain point, the financial performance will decrease as the Inflation increases. The results also show, that the critical Inflation point for Iranian firms is 14 percent and for firms with positive working capital 17 percent. Also, the results indicate that there is a non-linear and inverse U-shape relationship between working capital and financial performance, which indicates the existence of an optimal working capital level for firms. This study also reveals that Working Capital Management is an important factor in the relationship between Inflation and financial performance.

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APA: Copy

JOKAR, HOSSEIN, Daneshi, Vahid, & Bahar Moghadam, Mehdi. (2019). Investigating the Certain Point of Inflation and Optimal Level of Working Capital Management and its Impact on the Financial Performance of the Companies. JOURNAL OF FINANCIAL ACCOUNTING RESEARCH, 11(3 (41) ), 19-50. SID. https://sid.ir/paper/388371/en

Vancouver: Copy

JOKAR HOSSEIN, Daneshi Vahid, Bahar Moghadam Mehdi. Investigating the Certain Point of Inflation and Optimal Level of Working Capital Management and its Impact on the Financial Performance of the Companies. JOURNAL OF FINANCIAL ACCOUNTING RESEARCH[Internet]. 2019;11(3 (41) ):19-50. Available from: https://sid.ir/paper/388371/en

IEEE: Copy

HOSSEIN JOKAR, Vahid Daneshi, and Mehdi Bahar Moghadam, “Investigating the Certain Point of Inflation and Optimal Level of Working Capital Management and its Impact on the Financial Performance of the Companies,” JOURNAL OF FINANCIAL ACCOUNTING RESEARCH, vol. 11, no. 3 (41) , pp. 19–50, 2019, [Online]. Available: https://sid.ir/paper/388371/en

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